The client has a real estate S-corp, uses independent contracts to build houses. On the 1120S where would I report expenses incurred and paid to Subcontracts? Also, when cash contributions are made to increase a shareholder-owner basis, a promissory note is necessary to show loan repayments schedule. However if one was not established at the time of incorporation, what can be done? Any suggestions?
"Joe" wrote
I would think to the basis of the house(s) in question.
How do you treat the constructions costs?
In general, yes.
-- Paul A. Thomas, CPA Athens, Georgia taxman at negia.net
-- Tom Healy, CPA Boulder, CO Web:
If you are a tax professional and are asking these questions, I strongly suggest you not do the return.
-- David M. Woods, EA, ChFC, CLU Woods Financial Services Norwood, MA 02062
You raise an interesting question. (Remember, the only "dumb" question is the unasked question.) While ultimately the costs flow into the cost of goods sold section (page 2), you'll find that many such costs have to at first be capitalized and added to the basis of the property. Where you can identify actual subcontractor costs with a particular house, it's easy. Just make sure subs break down the mutli building costs on their invoices so you can allocate to each property. (The subs DO give you a bill, don't they? (BIG grin; cause I know they don't.) You'll really have some fun some day when a client , like mine, buys 22 acres, incurs a bunch of different costs, including building part of the highway (called a decell lane (deaccelleration), and the 22 acres are ultimately sold for both commercial and single family housing. Guess I'll put this LLC off till about April 2nd. ChEAr$, Harlan Lunsford, EA n LA Sun 13 Mar 2005
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